In the common good: the need for a new approach to funding Australia's schools.

This article considers evidence which suggests that Australia's current approach to the funding of non-government schools does not serve the common good. Educational provision is now segmented and a majority of private schools have resources that are either moderately or highly superior to those available in public schools. The current funding system has failed to coordinate the activities of public and private providers, leading to duplication of provision, reductions in economies of scale, and increases in per-student costs. Students whose backgrounds and disabilities make them relatively costly to teach are heavily concentrated in the public sector. Private sector recurrent subsidies are tied to public sector per-student costs, forcing Australian taxpayers into an upward spiral of increasing outlays. The article concludes by outlining some proposals for change that would lead to a new approach to funding Australia's schools.

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Over the past eight years, generous government subsidies combined with increased family outlays on high-fee private schools have meant that secondary schooling in Australia has become increasingly segregated and unequal. Many private schools now offer opulent facilities that contrast sharply with their public sector competitors. Moreover, it has become evident that Australia's schools are producing a highly educated elite with a low-performing 'tail'. This has undesirable effects for individuals and for our entire society, especially since, as a nation, we now compete with other knowledge economies in the global marketplace. Comparative data from the OECD's Programme for International Student Assessment indicate that while Australia's highest-scoring students are among the best in the world, our overall performance is less equitable than that of other high-performing countries. The growing differences among Australia's schools matter. Our current approach to school funding exacerbates inequalities, and this is not in anybody's interests. For the common good, we need a new approach to funding Australia's schools.

The knowledge economy and the MCEETYA declaration

In 1999, the Ministerial Council for Education, Training and Youth Affairs (MCEETYA) laid out Australia's national goals for schooling. It states:

   Australia's future depends upon each citizen having the necessary
   knowledge, understanding, skills and values for a productive and
   rewarding life in an educated, just, and open society. High quality
   schooling is central to achieving this vision. (MCEETYA, 1999, p. 2)

This clause in the MCEETYA declaration rests on substantial local and international research that consistently emphasises the need to achieve high standards of education while at the same time delivering quality education to all. It has become commonplace for government and business leaders to declare that in today's knowledge economy, education is essential for ensuring economic prosperity and advancement (ABS, 2002; Kirby, 2000; OECD, 1996, 2002; Western Australian Technology Industry Advisory Council, 2003). The argument advanced in such reports is that in a global market, firms must be internationally competitive if they are to remain viable. At the macro-economic level, competitive advantage depends on broadly based investments in skill formation; it requires a labour force where all workers--those in offices or on the factory floor, as well as their supervisors and managers--are highly skilled and can respond to innovation. Investments in education add value to labour. The alternative to a high-wage high-skill economy is a low-skill economy, where competitiveness can only be achieved by reducing labour costs (Tucker, 1990).

While few studies have attempted to relate this macro-economic discourse about skills and productivity to the educational achievements of individual students, an exception is the research conducted in the United States by educational economists Murnane and Levy (1996). Through a series of longitudinal analyses of the earnings of 25- to 34-year-olds, they found that the wages of college graduates are increasingly outstripping those of young people whose highest qualification is a high school diploma. This tendency was strong through the 1980s and showed no sign of waning during the 1990s. Murnane and Levy (1996) argued that the growing wage gap between tertiary graduates and those with only a high school education indicates that most firms now demand more advanced skills of their workers. This argument is reinforced by their finding that high school graduates who performed well on literacy and numeracy tests outstripped their lower-performing workmates in terms of wage levels by age 24. The authors concluded that providing a high quality secondary education to all matters because workplace success--indicated through higher wage levels--is more likely for students who have a firm grasp of basic literacy and numeracy skills.

Murnane and Levy (1996) are not alone in advocating that equity in education is important for economic reasons. Houghton and Sheehan (2000) and the Australian Bureau of Statistics (2002) argue that if Australia is to develop as a knowledge economy, we need to increase the number of highly skilled workers, increase the emphasis on cognitive skills, and increase incentives for firms and individuals to engage in lifelong learning. Doherty, McGaw and O'Loghlin (2004) argued that investment patterns which produce a highly educated elite but create a low-performing 'tail' have undesirable effects for individuals and for Australia as a whole. We will all be worse off if our front-line workforce have not achieved their full potential during their years in school. It is relatively easy to demonstrate that those individuals who do fall into the low-performing 'tail' suffer disproportionately. Changes in the Australian economy place early school leavers, particularly those who do not enter apprenticeships or gain post-school qualifications, at greater risk of low income, unemployment and dependency on government welfare throughout their entire lifespan (Dusseldorp Skills Forum & Applied Economics, 2002).

The costs of failing to educate all young people well are social as well as economic. School failure increases the likelihood of unemployment, which increases the likelihood of property crime and other antisocial behaviour (Chapman, Weatherburn, Kapuscinskiu, Chilvers, & Roussel, 2002). To counter this, we need a school system that will maximise the capability of all children. As Aitken (2005) points out, our criminal justice system costs about AUD$7 million a year and it is rising faster than inflation. While the problem is far from simple, Aitken suggests that it is generally true that people who have experienced educational success and have an active creative life 'are most unlikely to engage in burglaries, homicide, assault or any other crime' (2005, pp. 3-4). An education system that serves all students well provides tangible benefits for us all.

A high-achieving country with a low commitment to equity

If Australia's schools are to serve the common good, they must promote high standards of achievement, but they must also ensure that opportunities to learn are equitably distributed across the whole population. Ideally, the performance of Australian students should place us among the 'best' nations on standardised tests, but at the same time, our distribution of scores should show a relatively narrow spread around the mean. International comparative results reported in both the 2000 and 2003 rounds of the OECD's Programme for International Student Assessment (PISA) study do, in fact, place Australia among the top four participating countries in terms of our mean outcomes on reading literacy, mathematical literacy, and scientific literacy (Lokan, Greenwood, & Cresswell, 2000; Thomson, Cresswell & De Bortoli, 2003). These reports show that students in Finland were the only students who significantly outperformed Australian students on reading literacy in both 2000 and 2003. Students in Japan and Hong Kong significantly outperformed Australian students on mathematical literacy in 2000, and in 2003, they were joined by students from Korea and the Netherlands. Nevertheless, the mean scores of Australian students placed us in the top one-fifth of countries in both 2000 and 2003, in terms of reading, mathematical and scientific literacies.

In relation to equity, however, Australia has not done so well. PISA measures the 'spread' or score range by setting aside students in the top and bottom quartiles, and then examining the range of scores achieved by students in the middle quartiles. In 2000, among all 32 participating countries, Australia had one of the largest spreads of results in reading literacy for this middle range (Lokan et al., 2000, p. 9). In contrast, Canada, Ireland, Finland, Japan and Korea, had much lower spreads in the middle quartiles, suggesting that in these systems, excellence in achievement is more equitably distributed. These results suggest that social background makes more difference to achievement in Australia than it does in these other high-performing countries. Unequal outcomes might be expected in countries such as Brazil and Mexico, which have large populations of poor people. Yet even these countries showed smaller score ranges in the middle quartiles than did Australia in terms of reading literacy. Given Australia's relative affluence, the PISA 2000 results do suggest that we are a high-achieving country with a low commitment to equity. The 2003 PISA report for Australia does not provide detailed analyses of score ranges and spreads, but the problems identified in the 2000 report have not gone away. In their summary report for PISA 2003, Thomson et al. (2003, p. 16) report that in Australia 'there exists a distinct advantage for students with higher socio-economic backgrounds' so that Australia's school systems need to 'introduce policies that help counteract the effects of disadvantage', since 'the differences observed are greater than would be considered desirable in relation to our national aspirations'. These results from PISA suggest that Australia's schools are producing a highly educated elite with a low-performing 'tail'. Our best students are doing very well, but far too many of our other students are doing poorly.

Current analyses of data for student samples from the national Longitudinal Survey of Australian Youth (LSAY) series provide disturbing evidence regarding the growing effects of background inequality on students literacy and numeracy scores. Rothman (2002) analysed data based on five national studies of Australian 14-year-old students. These studies were conducted in 1975, 1980, 1989, 1995 and 1998. Each study involved over five thousand 14-year-old students, and individual level data was collected on reading comprehension, mathematics, gender, language spoken at home, geographical location, and family occupational status. Rothman's study is one of a series of literacy and numeracy studies conducted by the Australian Council for Educational Research, which uses a classification schema whereby family background is collapsed into four groups: professional/managerial (group I), clerical/sales (group II), trades (group III), and production/labourers (group IV).

Results from all five data samples over the past 25 years have found that students from group I families outperform students from group IV families on literacy and numeracy tests, and that the differences are statistically significant (Keeves & Bourke, 1976; Marks & Ainley, 1997). However, between 1975 and 1990, the performance gap between these two sets of students declined. In 1975, the gap between the two sets of students was 5.5 score points. One-fifth of the students from group IV families scored 40 or less, compared with fewer than one in ten of the students from group I families. This performance gap decreased from 5.5 in 1975 to 5.2 in 1989 and to 3.8 in 1995 (Marks & Ainley, 1997). At the time, Marks and Ainley noted this change and attributed it to a decline in the influence of family occupational background. It was a convenient finding in a context where the federal government was eager to reduce the emphasis on context, poverty and social disadvantage. Whereas earlier equity programs focused on contextual issues and supported whole-school change, Commonwealth programs after 1998 turned to individualistic strategies, arguing that social disadvantage can be overcome through the successful teaching of foundational skills (Taylor & Henry, 2000).

Rothman's (2002) analyses represent a set-back for those who proposed that family background effects were weakening. His results indicate that the performance gap between students from group I and group IV families increased significantly between 1995 and 1998. In 1998, the group I-group IV performance gap was 5.0 score points, almost as large as it had been a decade earlier. Multivariate analyses reinforced this finding: regression estimates indicating the superior performance of children of the professional/managerial classes relative to others declined over the 20 years from 1975 and 1995. However, their relative performance increased rapidly between 1995 and 1998.

Rothman also constructed a measure of 'school effects' by aggregating individual student characteristics to indicate the percentage of students in a school from labouring families (a proxy for disadvantage), and the percentage in a school from professional families (a proxy for advantage). Rothman noted that in 1975, schools where most parents came from managerial and professional backgrounds had no particular advantage over average schools, while students in schools with a high concentration of parents who were production workers were at a relative disadvantage. In 1998, this situation was reversed: attending a school that drew a large proportion of its enrolment from the managerial and professional classes significantly increased the chances of scoring well on reading comprehension and mathematics tests for each individual student attending that school. This study suggests that between 1975 and 1995, the negative effects of attending a 'disadvantaged' school were whittled away. However, a positive school effect emerged after 1995 for those attending schools with a high proportion of students from professional backgrounds. This effect was statistically significant for the first time in 1995 but became much stronger between 1995 and 1998.

The emergence of this positive school effect runs parallel with the sharp increases in private school attendance and the substantial transfers of resources from the public to the private sector that have occurred since 1995. It took 20 years for the public sector to lose 5 per cent of its enrolment share to the private sector (1974 to 1996) but in the past eight years, the transfer rate has been so high that the public sector has lost another 5 per cent in this brief period. Current PISA results suggest that while Australia's top students hold their own among the world's highest performers, the gap between these students and our low performers is unacceptably large. Rothman's results suggest this gap may be increasing. We are failing to level up the tail.

The 'right to choose', school funding policies and the segregation of Australia's schools

Over the past 25 years, substantial political and economic changes have caused parents high anxiety over the best educational path to take for their children. The combined impact of economic insecurity and political neo-liberalism leave little room for complacency. Driven by the economic restructuring and de-structuring promoted by global neo-liberalism, young people's modes of entry into the labour market are far more complex and risky than in the past (Lamb & Rumberger, 1998). More than half of all full-time jobs for teenage males and more than two-thirds of all full-time jobs for teenage females disappeared between 1977 and 1995 (Wooden, 1996). Research reports and government statistics promulgated in the popular press send clear warnings: low levels of education are closely linked to high rates of unemployment, while higher educational qualifications do appear to reduce the risk of economic insecurity (Lewis & Koshy, 1999).

During the 1980s, Australian families responded to this message and high school completion rates doubled. Yet over this same period, public high schools were subjected to strict fiscal constraints. In effect, they were forced into a government-regulated competition with privately operated schools that are funded by both government subsidies and fees levied on parents. In a recent research study, Watson (2003) found that in 27 per cent of private schools, the fees alone exceed the average resources per student in a government school. Altogether, 55 per cent of the students who attend private schools are in schools that have higher resource levels than the average government school. One of the most visible signs of increases in Commonwealth subsidies over the past eight years is private school spending on buildings and facilities. The most recent available data indicated that over the three years from 1998 to 2000, the average capital outlay of non-Catholic private schools in NSW was seven times greater (on a per student basis) as then in the average public school, while the ratio for Catholic schools compared with public schools over this period was three to one (MCEETYA, 2000). These capital expenditure ratios are substantially higher than for the preceding triennium (1995-97).

Many private schools now offer opulent facilities that contrast sharply with their public sector competitors (Australian Education Union (SA), 2004; NSW Public Education Council, 2005; Vinson, 2002). In the context of such inequalities, politicians have sought electoral advantage by presenting school choice as a central feature of their education polices. Parents are told that choosing a private school is the responsible thing to do, politicians gain by offering subsidies to support school choice, and as a result, the middle classes appear to be in full flight to the private sector. Yet despite the subsidies available, choosing a private school is only a possibility for families who can afford whatever fees these schools decide to impose.

The extent of government recurrent subsidies for private schools is evident from the following analyses, which are based on financial data reported in the MCEETYA National Report on Schooling and MCEETYA School Statistics Finance Collection (MCEETYA, 2000, 2001). These data show that grants from both the NSW and federal governments amount to 82 per cent of the recurrent expenditures of NSW Catholic sector schools and 42 per cent of the recurrent expenditure of the (much smaller) non-Catholic private sector schools. The complexities of public funding for schools can be more simply understood if we ask what the funding provides. The largest cost for any education provider is teachers' salaries. One interpretation of the financial data cited above is that the salaries of the total NSW teaching workforce, apart from that of a very small percentage of teachers, is met from the public purse. We know from publicly available expenditure data for NSW government schools that in-school wage and salary costs plus superannuation represents approximately 75 per cent of the total recurrent expenditure of that system. However, 82 per cent of the total recurrent expenditures of systemic Catholic schools comes from the public purse. This more than adequately pays for all teachers in these schools, with money left over for other things. In relation to private non-Catholic schools, it can be argued that if these teachers were remunerated in a way similar to teachers in public or Catholic systemic schools, then the government grants they receive would be sufficient to cover half the costs of teachers' salaries in independent schools. What this means is that all students in NSW schools, except the small proportion in half the independent school sector (around 6 or 7 per cent at most) are being taught by teachers paid for by the public.

Since coming to office in 1996 the Howard Government has consistently redistributed Commonwealth funds towards the private sector. Perhaps the clearest example of this was the Enrolment Benchmark Adjustment (EBA) policy, which was introduced in 1996 through amendments to the States Grants (Primary and Secondary) Assistance Act (DEST, 2003). Under the EBA, states were required to reimburse the Commonwealth at the rate of approximately $1700 per student for each student who transferred from the public sector to the private sector. Following pressure from the states and a MCEETYA review in 2000, the EBA was abandoned in 2001. However, during the four years that it operated, the states and territories lost $127.8 million while their overall enrollments (as distinct from enrollment shares) actually increased by 74,000 students (Burrow & Martin, 2001).

Commonwealth funding for private schools has increased steadily from 1974 to the mid-1990s. By 1995-96, the private school share of Commonwealth funds had reached 55.6 per cent. Following the election of the Howard Government this share increased rapidly. Funds have been lavished on private schools--even on high-fee schools--with no account taken of their resources relative to the resources available to public schools. In 2000, the Commonwealth spent a total of $2.9 billion on the one million students who were enrolled in private schools, and $1.8 billion on the 2.2 million students enrolled in public schools. This represented 61.7 per cent of Commonwealth outlays on schools. In 2001, Commonwealth outlays on private schools increased by half a billion dollars to $3.4 billion while total oudays on students enrolled in public schools remained relatively constant. Thus, in 2001 the Commonwealth's overall per capita outlay on private school students was over four times its per capita outlay on public school students, and the private sector share was up again, this time reaching 65.4 per cent (MCEETYA, 2000, 2001). Under the provisions announced in the 2004 Budget, the Commonwealth will provide $31.3 billion in funding for schools for the quadrennium 2005-08. This is an $8 billion increase over the current quadrennium. Over two-thirds of this will be allocated to private schools. This continues the overall trend which has seen the private school share of Commonwealth funds increase from 55.6 per cent in 1995-96 to 68.9 per cent by 2007-08 (Australian Senate Employment Workplace Relations and Education Committee, 2004).

The Commonwealth's rationale for this inequality is that while the states and territories are responsible for public schools, the Commonwealth must support the establishment of new private schools, subsidise their expansion, and deliver recurrent funding so that parents will be able to exercise their 'right' to choose a non-public school for their children. However, this is not a 'right' for all Australians. It is a 'right' only for parents who can afford to pay the fees and conform to religious or other admissions criteria often entailed in private school enrolments.

As OECD education director McGaw pointed out, 'Australia is unique in the extent to which non-government schools are able to combine private resources with government funding to achieve a substantial advantage over the government system' (Doherty et al., 2004, p. 13). Several other nations sustain dual systems of public and private schools, but none of them provides so many resources to its private sector schools while imposing so few controls over them in return. In the Netherlands, 77 per cent of children attend 'private' schools but these schools along with the public schools are funded through taxation revenue. Private schools in the Netherlands may not charge fees, but are entitled to be distinctive in terms of the value orientation, religious affiliation, or the pedagogies they feature. In the United Kingdom, schools that receive government funds are likewise subject to government regulation: a major landmark in the development of the United Kingdom dual system was the 1944 Education Act, which invited Church schools either to function independently, in which case they would receive no direct state subsidies, or join the state system, accept a substantial degree of regulation and constraint, and opt either for 'aided' or for 'controlled' status. Controlled schools receive full funding in return for handing over their buildings to the Local Education Authority (LEA); the LEA employs the teaching staff and determines the admission policies of these schools, yet allows them to retain their special character. So called 'aided' schools receive less state funding but have greater influence over the appointment of teaching staff, in comparison with 'controlled' schools. Both categories of schools sit within the so-called Maintained sector. Aspects of the 1944 Act were modified by the 1988 Education Reform Act (see Ball & Bowe, 1992; UK net guide, 2004). Nevertheless, the United Kingdom's system is still based on the principle that schools can only achieve a greater degree of independence from Local Education

Authority control if they accept a lower level of government funding. Australia is also unusual in lacking clear mechanisms for adjusting the supply of school places to demographic demand. In the United States, for example, neighbourhood schools are funded though local property taxes, which means that local citizens are more inclined to reform their neighbourhood schools than to fund a parallel system of schools that would potentially lead to a wasteful duplication of existing facilities. Although some states now provide students with vouchers that can be used towards the cost of private school fees, private schools in the United States are not directly funded by the government. Approximately 90 per cent of children in the United States attend public schools from kindergarten to twelfth grade. Despite substantial improvements in real family incomes over the past 60 years, the overall proportion of students attending private schools has not varied greatly during this period (Benveniste, Carnoy, & Rothstein, 2003).

It is not in the common interest of Australian taxpayers to fund new private schools that duplicate existing public provision, but in many cases, new private schools are being built or existing ones are expanding even in catchments where the public schools have unfilled enrolment capacity and could easily take additional pupils. While the Commonwealth government provides extensive support for private schools through its capital grants program, the state and territory governments also assist through their interest subsidy schemes. Over the 30 years since the re-introduction of state aid, no stable mechanism has been established to reduce the independence and separation of the decision-making processes whereby public and private authorities decide on the establishment of new schools or enrolment expansion in existing ones.

Shortly after the election of the Hawke Government in 1983, a Ministerial Review was held to inquire into the creation of a new private school in the ACT. This review estimated the costs to taxpayers of building a new private school in a neighbourhood where there was no need for further school places. On the negative side of the ledger were the costs of a new private school: these include the direct outlays from the public purse, specifically, capital grants from Commonwealth, state/territory interest subsidies, and the recurrent subsidies paid toward tuition costs. Then there are the indirect costs which include increases in the per capita costs of educating each student in nearby public schools as these schools shrink and lose their economies of scale. Anderson (1983) estimated these costs and found that if a school educates 400 students rather than 800, the per-student costs increase by 30 per cent, while if a school educates only 200 students the per-capita costs are double what they would be for a school of 800 pupils.

The Anderson review noted that if new schools are built in established areas and existing schools are not closed, then the newly constructed private schools will inevitably cause the existing public schools to shrink. However, since private schools attract a parental contribution toward the costs of tuition, there are also savings which may, over a period of time, offset the cost of establishing the new private school. The rate at which the break-even point is reached depends on the magnitude of the capital and recurrent subsidies as well as the losses to the government associated with the increased cost of sustaining local public schools that are forced to operate on a smaller and less efficient scale. The Anderson review concluded that where there is no demographic need for a new school, the savings accrued from parental contributions may never break even with the costs the government incurs in establishing and maintaining the new school.

Writing in the context of this review, Anderson (1983) wrote:

   ... there appear to have been established expectations that any new
   registered private school has a right to government funding
   irrespective of its purposes or educational approaches, irrespective
   of whether or not new pupil places are needed, and irrespective of
   any impact its establishment may have on existing government
   schools. (p. 20)

Following this review, the Hawke Government introduced the New Schools Policy in 1986, in an attempt to constrain the creation of new private schools in locations where demographic need could not be established. The New Schools Policy exercised some constraint over the establishment of schools that would, if built, duplicate existing educational facilities. In 1996, the Howard Government abandoned this policy. Since then, Commonwealth subsidies have been used to establish a psuedo-marketplace in which public schools must compete against a wide array of government-funded denominational providers, including new low-fee Christian schools, ethno-linguistic schools, Catholic schools, as well as high-fee selective schools.

Over the past four years, through a Sydney University program on comprehensive high schools, interviews have been conducted with school principals in Sydney as well as the mid-north coast and the central west of NSW (Campbell & Sherington, 2004). The authors found that in smaller towns where distance separates them from other towns, comprehensive secondary schools tend to be strong and stable. In the city, however, the competition for students is intense. Comments by an urban secondary school principal interviewed illustrate the pressures public schools face:

   You have a real cultural thing and a social aspect of what it means
   to send your kid to a private school, even if it's low cost ...
   There's a bit of a social stigma attached to sending you kid to the
   local State school ... and that's a challenge we are trying to meet.
   (Campbell & Sherington, 2004, p. 23)

Principals interviewed in this study pointed out that if their enrolments do slip, they face increased per capita costs and it becomes difficult to offer the full range of subjects they would normally offer at the Year 12 level. Some noted that they are not losing their brightest kids but are losing the ones who are better off. This observation is supported by national data analyses conducted by Ryan and Watson (2004), who found that a higher proportion of government school students come from low socioeconomic status backgrounds than was the case 30 years ago. They argue that if government subsidies had been used to reduce school fees, then the non-government schools would indeed he offering choices that might benefit ordinary families. But they are not; rather than reducing fees and making admissions more equitable, the fees have remained high, especially in the non-Catholic sector, while the taxpayer-funded subsidies have been used to reduce staff-student ratios.

Private schools are being subsidised by both state and Commonwealth governments. These governments then demand that their own schools compete with private schools on a highly unequal footing. The inequalities are particularly obvious in the private non-Catholic sector: partly as a result of the generous infusion of pubic funds, their buildings are new, their facilities sparkle, and their teacher-student ratios are low. These schools enrol a relatively small proportion of students from families of low socioeconomic status. Data compiled for the recent report of the NSW Public Education Council (2005) show that private sector schools (Catholic and non-Catholic taken together) enrol far fewer than their fair share of students who demand additional support and are expensive to teach. While three out of every ten school students in NSW attends a private school, these schools teach only one in ten of the newly arrived non-English-speaking immigrants in NSW, only one in ten of the state's Indigenous students, one in five of students with disabilities, one in five from families of low socioeconomic status, and fewer than one in five of students from remote area schools. In summary, public schools bear a disproportionately heavier load of students from high-cost categories than do private schools.

Not only is our mixed public-private system inequitable and inefficient, it is also costly. It contains no mechanisms for preventing duplication of provision. Furthermore, it is possible that the increasing concentration of students from high-cost categories in public schools may lead to an upward spiral in the level of public subsidies provided to the private sector. The reason is that government subsidies for non-government schools are tied to the Average Government School Recurrent Cost (AGSRC). The average per-student cost of educating a child in a government school increases as 'low cost' students transfer to private schools while students from low socioeconomic backgrounds, students with disabilities, non-English-speaking recent immigrants, and Indigenous students remain behind. Assuming that state and federal governments follow through on their obligations and continue to provide the supplementary funds that students in these categories are entitled to, then the AGSRC will increase. As it rises, the subsidies available to non-government schools will also rise. The impact of this upward spiral will be exacerbated over the next decade as demographic declines in the size of the upcoming school-age cohorts kick in. The Australian Bureau of Statistics estimates that the total Australian school-age population is likely to fall between 4 and 7 per cent between 2003 and 2020. These population declines will lead to more intense competition between public and private schools, smaller schools, and reductions in economies of scale within existing schools.

The need for a new approach to funding Australia's schools

Two arguments have been presented in this article in support of a new approach to funding Australia's schools. These are (a) that a high-performing education system with a low commitment to equity is a poor match to the needs of the 'knowledge economy' and (b) that all taxpayers will suffer if we continue with our current funding system. The key problems of this current system are that it cannot prevent the duplication of schooling provision, and in addition, it is leading to greater concentrations of students from high-cost categories in the public system. As per-student costs in the public system increase, governments will either have to renege on their commitments to supplementary funding for students from these categories, or, if they do sustain these commitments, they will have to increase the level of private school subsidies, since these are tied to the AGSRC. This will exact a heavy toll on taxpayers. These cost increases are not in our common interests: they would merely perpetuate an inequitable and segmented education system. They would not reduce the growing differences between our schools and they would not level up the tail.

There are two policy reforms that represent realistic ways forward. One would be to re-introduce the New Schools Policy. This would mean that as a precondition for the establishment of a new school or the expansion of an existing school, an impact assessment would be needed to ascertain what impact the proposed development would have on nearby public schools. Consultation with local communities is needed to determine whether it would be possible for existing schools to meet the needs of those who are seeking alternative educational provisions. This would not be a simple matter, since it would mean that state education bureaucracies would need to explore ways of involving communities in some of the central decisions about schools and how they run. It is somewhat surprising that the careful impact assessments that were at the heart of the Anderson review have not been repeated or revisited during the past 20 years. Since we now stand at the beginning of a period of significant demographic decline, it may be timely to do so.

The second reform would be one that would lead school funding to be aligned with the costs involved in teaching the specific populations they serve. Cost variations exist at the school level and these are generated by factors such as the proportion of students from low socioeconomic backgrounds, students who are refugees or recent immigrants, students who do not speak English, and students with disabilities. In 2001, MCEETYA established a taskforce charged with producing recommendations that would take these cost variations into account. Once this work is complete, it will be easier for governments to develop a clear link between the desired outcomes for all students and the costs of providing the services that would lead to those outcomes.

The growing differences among Australia's schools matter. Our current approach to school funding exacerbates inequalities, and this is not in anybody's interests. For the common good, we need a new approach to funding Australia's schools.

Key words

disadvantaged schools privatisation educational equity (finance) public policy private school aid funding formulas

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Margaret Vickers is Professor of Education in the School of Education, University of Western Sydney, Locked Bag 1797, Penrith DC NSW 1797. E-mail: [e-mail]

Margaret Vickers

University of Western Sydney